Consumer Belt-Tightening Could Cost the US Economy $92 Billion This Year

Do the math.

A staggering $92 billion could vanish from the American economy annually as consumers tighten their belts in response to the economic uncertainty created by the Trump administration’s global trade policies. As Karen Webster noted in a recent column, this isn’t a projection based on complex economic models or worst-case scenarios. It’s the simple math derived from actual consumer behavior already underway nationwide.

But as the tariff on again/off again scenarios continue to play out, that math is worth revisiting. According to census data, U.S. retail spending reached about $7.4 trillion over the last year, roughly 80% of which comes from consumers. Recent PYMNTS Intelligence research finds that 78% of these consumers say they’ll cut back by buying less or buying cheaper. Even a modest 2% reduction in spending across this group would remove nearly $100 billion from the economy, inviting, as Webster put it, “a self-inflicted recession” driven not by market collapse but by collective caution that is tied to the uncertainty caused by the trade war the Trump administration has waged on the world.

This pullback cuts across income levels and spending categories, creating an economic ripple effect that threatens to become a wave. And it’s happening despite consumers needing to purchase essentials — items that now cost significantly more than they did a year ago. So, as earnings calls portray the consumer as “still spending,” what they buy as a matter of everyday routine costs them more. How much they can buy is going to reflect that growing gap. In a world where the prospect of increasing prices will hit everything from autos to snack foods, the justification for finding a spot in the pantry for some of the most coveted premium products is waning. Global beverages giant PepsiCo reported a 1.8% decline in sales for Q1 2025, citing consumer softness across its branded portfolio of Pepsi, Frito Lay and Gatorade products. Even promotions, company executives said, failed to drive sales.

Soft Metrics

And nowhere is this gap more visible than in the “soft” metrics. Consumer sentiment is at its fourth lowest reading since 1952, according to the University of Michigan’s latest consumer survey. Shopping cart calculations have become the new normal. The name-brand products that were an unquestioned part of the weekly grocery haul in January have taken a back seat to comparing price-per-ounce between the store brand and the budget option, despite household preferences. In a world where the prospect that everything will cost more for everyone, the justification for finding a spot in the pantry for some of the most coveted premium products is waning.

Then trouble isn’t limited to the CPG sector. Major players in the hospitality industry are bailing on projections for the balance of the year. The dollar is weaker, so European vacations are more costly. The U.S. is a less appealing destination for some international travelers, leaving cities and towns that make bank on the tourist trade concerned. According to sources, the U.S. economy could collectively take a $90 billion hit as those tourists stay away and/or boycott American products.

The Necessity Paradox

What the consumer is left with is the contradiction of today’s economy: Spending more while buying less. Even as consumers cut back, necessities still command their dollars. “You can skip the morning latte, but you can’t skip feeding your family.” Webster says. “You can cancel streaming subscriptions, but you still must pay the electric bill.”

If prices increase by 10%, the PYMNTS study finds that 18% of consumers say they will stop buying certain items altogether, compounding the $92 billion economic impact.

The Sacred Expenses

Not all discretionary spending has disappeared, however. Certain categories remain protected from cuts, according to PYMNTS Intelligence research. For parents, children’s activities top the list of “sacred expenses.” Despite financial pressure, payments continue for soccer equipment, piano lessons and math tutoring. For adults across age groups, personal care services remain surprisingly resilient. Haircuts, basic beauty treatments and health-related services are maintained even as other expenses are slashed.

And while individual households worry about their specific budgets, businesses face their own uncertainty crisis, amplifying the $92 billion consumer pullback. According to the latest PYMNTS Intelligence March 2025 Certainty Project, 25% of middle-market businesses report facing high levels of uncertainty, with a staggering cost equivalent to 6% of their annual revenues.

The ripple effects are tangible: 32% of these businesses say they have or will miss business opportunities due to that uncertainty, 33% faced delays in getting products to market, and 31% experienced client turnover because of their own uncertain business outlooks. That’s roughly a third of U.S. businesses making between $100 million to $1 billion in annual revenue — and the integral bridge between the enterprise and smaller business supply chains — who face some sort of economic uncertainty.

“The leadership dilemma becomes clear,” according to Webster. “Do businesses absorb the costs and slash margins or pass them on to customers who are already cutting back or find new ways to deliver value with fewer resources? None of these options look particularly appealing, especially as these businesses face growing uncertainties about their own sales and margins, making them ill-positioned to absorb much of these higher costs.”

What may become clearer as the waters of uncertainty remain muddy is that consumers may not have the choices they once had to buy what they want or need. Media sources report that many retailers, including Target, have begun canceling orders from Chinese suppliers given the hefty tariffs now imposed. It has been reported that the Port of Los Angeles will receive a third fewer overseas vessels year over year as of May 10, an indication of reduced order flow and shipped inventory.

The Expectations Reset

The PYMNTS Intelligence study of 2,820 consumers revealed something that analysts were only beginning to fully understand: Consumers were already responding to economic threats before they fully materialized in the aftermath of Liberation Day. The predictive sensitivity of everyday shoppers was outpacing professional forecasts.

“The funny thing about consumers is that it is easy to characterize them and their sentiment as either optimistic or pessimistic,” Webster said. “The reality is that they are neither. They are realistic.”

Consumers will continue buying necessities. Food, housing, healthcare, transportation, and these expenses aren’t optional. They will allocate money for splurges; however, they define them. But they will buy differently, choosing cheaper alternatives that may still cost more than the favored brands they used to purchase, which have become out of reach.

Families have already adjusted their expectations. Businesses have begun exploring automation to reduce labor costs. These individual adaptations, multiplied across millions of households and businesses, are reshaping the economy from the ground up. “The longer the uncertainty, the harder it will be to unwind the momentum that this collective groundswell may create,” Webster emphasized.

These adaptations — ordinary people and businesses making careful choices in uncertain times — reveal more about the future than any model or prediction. The PYMNTS data confirms what consumer behavior already shows: in times of uncertainty, you buy what you need, but you think twice about everything else.

Even when what you need costs more than before.

“Maybe the $92 billion question right now is whether these individual, rational decisions will collectively create the very economic downturn everyone is trying to avoid,” Webster said.